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on Regulation |
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Issue of 2005‒07‒11
thirteen papers chosen by Christian Calmes Université du Québec en Outaouais, Canada |
| By: | John Armour |
| Abstract: | This paper makes a case for the future development of European corporate law through regulatory competition rather than EC legislation |
| Keywords: | European law, company law, regulatory competition, corporate insolvency |
| JEL: | G34 H73 K22 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp307&r=reg |
| By: | Motchenkova,Evgenia; Laan,Rob van der (Tilburg University, Center for Economic Research) |
| Abstract: | This paper studies the effects of leniency programs on the behavior of firms participating in illegal cartel agreements. The main contribution of the paper is that we consider asymmetric firms. In general, firms differ in size and operate in several different markets. In our model, they form a cartel in one market only. This asymmetry results in additional costs in case of disclosure of the cartel, which are caused by an asymmetric reduction of the sales in other markets due to a negative reputation effect. This modeling framework can also be applied to the case of international cartels, where firms are subject to different punishment procedures according to the laws of their countries, or in situations where following an application for leniency firms are subject to costs other than the fine itself and where these costs depend on individual characteristics of the firm. Moreover, following the rules of existing Leniency Programs, we analyze the effects of the strictness of the Leniency Programs, which reflects the likelihood of getting complete exemption from the fine even in case many firms self-report simultaneously. Our main results are that, first, leniency programs work better for small (less diversified) companies, in the sense that a lower rate of law enforcement is needed in order to induce self-reporting by less diversified firms. At the same time, big (more diversified) firms are less likely to start a cartel in the first place given the possibility of self-reporting in the future. Second, the more cartelized the economy, the less strict the rules of leniency programs should be. |
| JEL: | K21 L41 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200574&r=reg |
| By: | Robert R. Bliss; George C. Kaufman |
| Abstract: | In the U.S., as in most countries with well- developed securities markets, derivative securities enjoy special protections under insolvency resolution laws. Most creditors are “stayed” from enforcing their rights while a firm is in bankruptcy. However, many derivatives contracts are exempt from these stays. Furthermore, derivatives enjoy netting and close-out, or termination, privileges which are not always available to most other creditors. The primary argument used to motivate passage of legislation granting these extraordinary protections is that derivatives markets are a major source of systemic risk in financial markets and that netting and close- out reduce this risk. To date, these assertions have not been subjected to rigorous economic scrutiny. This paper critically reexamines this hypothesis. These relationships are more complex than often perceived. We conclude that it is not clear whether netting, collateral, and/or close-out lead to reduced systemic risk, once the impact of these protections on the size and structure of the derivatives market has been taken into account. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-05-03&r=reg |
| By: | Michael R. Pakko |
| Abstract: | A paper recently published in the journal Tobacco Control purports to show that the implementation of a smoking prohibition in Delaware had no statistically significant effect on the revenues of three gaming facilities in that state. After correcting for evident errors in that analysis, I find that the smoke-free law did affect revenues from gaming in Delaware. Total gaming revenues are estimated to have declined by at least $6 million per month after the implementation of Delaware*s Clean Indoor Air Law. This represents a loss of over 12% relative to average monthly revenues in the year preceding the smoking ban. |
| Keywords: | Gambling industry |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2005-028&r=reg |
| By: | Dahlberg, Matz (IFAU - Institute for Labour Market Policy Evaluation); Gustavsson, Magnus (Department of Economics, Uppsala University) |
| Abstract: | Earlier studies on income inequality and crime have typically used total income or total earnings. However, it is quite likely that it is changes in permanent rather than in transitory income that affects crime rates. The purpose of this paper is therefore to disentangle the two effects by, first, estimating region-specific inequality in permanent and transitory income and, second, estimating crime equations with the two separate income components as explanatory variables. The results indicate that it is important to separate the two effects; while an increase in the inequality in permanent income yields a positive and significant effect on total crimes and three different property crimes, an increase in the inequality in transitory income has no significant effect on any type of crime. Using a traditional, aggregate, measure of income yields mainly insignificant effects on crime. |
| Keywords: | Crime; permanent income; transitory income |
| JEL: | J30 K40 |
| Date: | 2005–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_019&r=reg |
| By: | Kaur Rupinder; Maheshwari Sunil Kumar |
| Abstract: | In this study we examine the issue of the need of labour reforms in the globalised economy. The two legislations discussed in detail are: Chapter VB of Industrial Disputes Act, 1947- provisions relating to layoff, retrenchment and closure of industrial establishments and provisions regarding abolition and regulation of contract labour in Contract Labour (Regulations and Abolition) Act, 1970. We have dealt the issue from multiple stakeholder (Trade Unions, Employers, Political Parties and the Government) point of view. We have listed their interests and the respective positions taken by them. Based on these observations, we have made certain suggestions and emphasized the need to take the balanced view and build consensus in the larger interests of the stakeholders. |
| Date: | 2005–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2005-07-02&r=reg |
| By: | Evans, David; Schmalensee, Richard |
| Abstract: | This essay surveys the economic literature on interchange fees and the debate over whether interchange should be regulated and, if so, how. We consider, first, the operation of unitary payment systems, like American Express, in the context of the recent economic literature on two-sided markets, in which businesses cater to two interdependent groups of customers. The main focus is on the determination of price structure. We then discuss the basic economics of multi-party payment systems and the role of interchange in the operation of such systems under some standard, though unrealistic, simplifying assumptions. The key point of this discussion is that the interchange fee is not an ordinary price; its most direct effect is on price structure, not price level. We then examine the implications for privately determined interchange fees of some of the relevant market imperfections that have been discussed in the economic literature. While some studies suggest that privately determined interchange fees are inefficiently high, others point to fees being inefficiently low. Moreover, there is a consensus among economists that, as a matter of theory, it is not possible to arrive, except by happenstance, at the socially optimal interchange fee through any regulatory system that considers only costs. This distinguishes the market imperfections at issue here for multi-party systems from the more familiar area of public utility regulation, where setting price equal to marginal cost is theoretically ideal. Next, we consider the issues facing policy makers. Since there is so much uncertainty about the relation between privately and socially optimal interchange fees, the outcome of a policy debate can depend critically on who bears the burden of proof under whatever set of institutions and laws the deliberation takes place. There is no apparent basis in today's economics - at a theoretical or empirical level - for concluding that it is generally possible to improve social welfare by a noticeable reduction in privately set interchange fees. Thus, if antitrust or other regulators had to show that such intervention would improve welfare, they could not do so. This, again, is quite unlike public utility regulation or many areas of antitrust including, in particular, ordinary cartels. By the same token, there is no basis in economics for concluding that the privately set interchange fee is just right. Thus, if card associations had to bear the burden of proof - for example, to obtain a comfort or clearance letter from authorities for engaging in presumptively illegal coordinated behavior - it would be difficult for them to demonstrate that they set socially optimal fees. We take a pragmatic approach by suggesting two fact-based inquiries that we believe policymakers should undertake before intervening to affect interchange. First, policymakers should establish that there is a significant market failure that needs to be addressed. Second, policymakers should establish that it is possible to correct a serious market imperfection, assuming one exists, by whatever intervention they are considering (such as cost-based regulation of interchange fee levels) and thereby to increase social welfare significantly after taking into account other distortions that the intervention may create. We illustrate both of these points by examining the recent Australian experience. |
| Date: | 2005–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:mit:sloanp:18181&r=reg |
| By: | Yongil Jeon (Central Michigan University); Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut) |
| Abstract: | Regulatory change not seen since the Great Depression swept the U.S. banking industry beginning in the early 1980s and culminating with the Interstate Banking and Branching Efficiency Act of 1994. Banking analysts anticipated dramatic consolidation with large numbers of mergers and acquisitions. Less well documented, but equally important, was the continuing entry of new banks, tempering the decline in the overall number of banking institutions. This paper examines whether deregulation affected bank new-charter (birth), failure (death), and merger (marriage) rates during the 1980s and 1990s after controlling for bank performance and state economic activity. We find evidence that intrastate deregulation stimulated births and marriages, but not deaths. Moreover, we find little evidence that interstate deregulation affected births, deaths, or marriages, except that the marriage rate rose after the implementation of the Interstate Banking and Branching Efficiency Act. Finally, pair-wise temporal causality tests among births, deaths, and marriages show that mergers temporally lead new charters and that failures lead mergers (a demonstration effect). |
| Keywords: | commercial banks, new charters, failures, mergers |
| JEL: | G21 L51 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2005-24&r=reg |
| By: | Juan M.C. Larrosa (CONICET-Universidad Nacional del Sur) |
| Abstract: | Legal profession represents a key labor sector whether in politics or business in any developed or underdeveloped country. What resources do lawyers use for matching the demand to their own services’ supply? Private sector lawyers make use of their level of human capital and their social capital for this to be accomplished. This work makes a literature survey focusing on legal profession and their relationships with these capital dimensions. Particular interest is given to the relationship of these capital forms and the effectiveness of professional performance. |
| Keywords: | Human capital, social capital, legal profession |
| JEL: | J41 J43 A12 |
| Date: | 2005–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0507005&r=reg |
| By: | Andreas Diekmann (ETH Zurich) |
| Abstract: | Digits in statistical data produced by natural or social processes are often distributed in a manner described by “Benford’s law”. Recently, a test against this distribution was used to identify fraudulent accounting data. This test is based on the supposition that real data follow the Benford distribution while fabricated data do not. Is it possible to apply Benford tests to detect fabricated or falsified scientific data as well as fraudulent financial data? We approached this question in two ways. First, we examined the use of the Benford distribution as a standard by checking digit frequencies in published statistical estimates. Second, we conducted experiments in which subjects were asked to fabricate statistical estimates (regression coefficients). These experimental data were scrutinized for possible deviations from the Benford distribution. There were two main findings. First, the digits of the published regression coefficients were approximately Benford distributed. Second, the experimental results yielded new insights into the strengths and weaknesses of Benford tests. At least in the case of regression coefficients, there were indications that checks for digit-preference anomalies should focus less on the first and more on the second and higher-digits. |
| Keywords: | Benford, Benford's law, falsification of data, fabrication of data |
| JEL: | C |
| Date: | 2005–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpot:0507001&r=reg |
| By: | Samia Tavares (Rochester Institute of Technology) |
| Abstract: | Corruption scandals seem to abound in countries that have recently undergone reform. Despite the proliferation of stories in the news media, no one has examined whether reform—be it democratization or economic liberalization or both—actually causes an increase in corruption. Theory provides no guidance as to the direction of causality—on the one hand, reforms make politicians accountable to voters, as well as introduce more competition, which should decrease corruption. On the other hand, the need for politicians to now raise campaign funds, as well as the increased availability of rents that results from economic liberalization provides for an incentive for corruption. This paper uses the numerous cases of democratizations and economic liberalizations that occurred in the 80s and 90s to examine this issue. The paper finds that democratizations reduce corruption, while liberalization may actually increase corruption. Furthermore, undertaking both reforms in rapid succession actually leads to a decrease in corruption, while countries that democratized more than 5 years after liberalizing experienced an increase in corruption. |
| Keywords: | corruption; liberalization; government; democracy |
| JEL: | D72 D73 H11 H77 K42 |
| Date: | 2005–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwppe:0507003&r=reg |
| By: | John W. Dawson |
| Abstract: | This paper uses cross-country regulation data to estimate the relationship between regulation and long-run growth in a large sample of countries. The empirical results suggest that business regulations have a negative impact on growth even when the level of economic freedom is also included in the model. Credit market regulations, however, are found to have a positive impact on investment rates across countries. Volatility in the regulatory regime is found to be negatively related to growth, even when the level and volatility of economic freedom is included in the model. The results suggest interesting implications with respect to policy toward regulatory reform. |
| Date: | 2003 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:03-10&r=reg |
| By: | John W. Dawson |
| Abstract: | This paper uses the number of pages in the Code of Federal Regulations to investigate the empirical relationship between federal regulation and macroeconomic performance in the U.S. The analysis extends the work of previous studies by using an aggregate production function framework and cointegration methodology. The results suggest that regulation generally is negatively related to aggregate economic performance in both the short run and the long run. Some specific areas of regulation are also found to have important long-run effects on economic activity, some positive and some negative. |
| JEL: | L50 O40 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:05-16&r=reg |